10th Annual Bankers Briefing PRESENTATION MATERIALS May 21, 2015 FOSTER PEPPER PLLC 1111 Third Avenue, Suite 3400 Seattle, Washington 98101-3299 www.foster.com BANKERS BRIEFING AGENDA MODERATED BY JOHN BLEY, FOSTER PEPPER ______________________________________________________________________________ THURSDAY, MAY 21, 2015 1:00 p.m. ……………………………………………………………………… Registration 1:30 p.m. .……………………………………………………………….. Futurist Panel The State of Pacific Northwest Banks and Banking in the Year 2025 Tom Cleveland, Access Business Finance, LLC Jim Pishue, Washington Bankers Association Bob Rogowski, Wedbush Securities, Inc., PCS Investment Banking, Community Banking Group Foster Pepper Panel Discussions Commercial Lending Trends and Hot Button Issues for 2015 Julie Seidenstein, Foster Pepper Ben Seeger, Foster Pepper Top 3 Employment Law Issues for 2015 That Should Keep You Up at Night Steve Peltin, Foster Pepper 3:15 p.m. .……………………………………………………………………………. Break Bankers Panel Navigating Pacific Northwest Banking in 2015 Brian Vance, Heritage Financial Corporation Denise Portman, Bank of the Pacific Jim Haley, Thurston First Bank Closing Remarks The State of the State in 2015 Scott Jarvis, Washington State Department of Financial Institutions 5:00 p.m. ..……………………………………………………………………… Reception 10th Annual Bankers Briefing Attendee List Thursday, May 21, 2015 Name Company Greg Meadows .......................ALX Consulting, Inc. Jay Wernz...............................Bank of Fairfield Douglas Biddle.......................Bank of the Pacific Walker Evans .........................Bank of the Pacific Bruce MacNaughton ..............Bank of the Pacific Brian Garrett ..........................Banking Consultant Brent Orrico ...........................Banner Corporation DeeDee Anderson ..................Cashmere Valley Bank Jenny Cravens ........................Cashmere Valley Bank Aaron Strong ..........................Cashmere Valley Bank Jim Tinker ..............................Cashmere Valley Bank Kortney Todd .........................Cashmere Valley Bank Craig Tall ...............................CET Capital Partners Robert Weisel.........................Columbia Bank Mark MacDonald ...................Community Bankers of Washington Ralph Chiocco, Jr. ..................Elliot Cove Capital Management Conrad Wouters .....................Evergreen Home Loans Eric Jensen .............................Federal Home Loan Bank of Seattle Mele Hunter ...........................First Citizens Bank Robert Powell.........................First Citizens Bank Ben Crowl ..............................First Sound Bank Patrick Fahey .........................First Sound Bank Bruce Tretzen .........................First Sound Bank Amanda Bley .........................Freimund Jackson & Tardif, PLLC Michael Powell ......................Harborstone Credit Union Jeffrey Deuel ..........................Heritage Bank Elizabeth Baker ......................HomeStreet Bank Thomas Prohaska ...................Idaho Trust Bank Sherm Losee...........................Islanders Bank Susan Alterman ......................Kell, Alterman & Runstein, L.L.P. Yong Lee ................................KeyBank Mark Weed.............................Main Street Equity Partners Peter Marchel .........................Marchel & Associates Risk Consulting Christie Bakker ......................McGladrey LLP Robert Best.............................McGladrey LLP Liz Kiley ................................McLagan Scott Boyer.............................Mountain Pacific Bank Bryant Stewart .......................Mountain Pacific Bank Name Company Daniel Lowell.........................Northrim Bank Eddie Eugenio ........................Payne West Insurance Rick Zelinski ..........................Payne West Insurance Mike Paul ...............................Plaza Bank Sean Brennan .........................Puget Sound Bank Jim Mitchell ...........................Puget Sound Bank Skip Rowley ...........................Rowley Properties, Inc. Steve Barker ...........................Seattle Bank John Blizzard .........................Seattle Bank Benjamin Noble .....................Sound Banking Company Matt Deines ............................Sound Community Bank Terry Benish...........................Special Assets Len Cereghino ........................The Cereghino Group Brandon Kowsky ...................U.S. Bank Jon Jones ................................Washington Business Bank Gordon Osberg .......................Washington Business Bank Rick Collette ..........................Washington Federal Sean Mizokawa ......................Washington Federal Brian Rogowski .....................Washington Federal Joseph Vincent .......................Washington State Department of Financial Institutions Bruce Clawson .......................Wells Fargo Tran Meyers ...........................Wells Fargo Presenter Name Company Tom Cleveland .......................Access Business Finance, LLC Denise Portman ......................Bank of the Pacific John Bley ...............................Foster Pepper Steve Peltin ............................Foster Pepper Ben Seeger .............................Foster Pepper Julie Seidenstein.....................Foster Pepper Brian Vance ...........................Heritage Financial Corporation Jim Haley ...............................Thurston First Bank Jim Pishue ..............................Washington Bankers Association Scott Jarvis .............................Washington State Department of Financial Institutions Bob Rogowski ........................Wedbush Securities, Inc. 10th Annual Bankers Briefing 10th Annual Bankers Briefing, May 21, 2015 Futurist Panel The State of Pacific Northwest Banks and Banking in the Year 2025 Tom Cleveland, Access Business Finance, LLC Jim Pishue, Washington Bankers Association Bob Rogowski, Wedbush Securities, Inc. 10th Annual Bankers Briefing – May 2015 Presentation for: Foster Pepper PLCC The Future of Banking Seattle, Washington May 21, 2015 Robert J. Rogowski, Managing Director, PCS Investment Banking TABLE OF CONTENTS Page Number I. Current Operating Environment for WA Banks……………………3 II. Demographics and Starbucks……..……………………………… 9 III. Known Unknowns……………………………………………………14 Wedbush Securities Inc. 4 I. Current Operating Environment Wedbush Securities Inc. 5 A. WA Deposit Market Share Data at June 30, 2014 Washington Deposit Market Share at June 30, 2014 Inside of M arke t No. of De posits M arke t Subtotal Total Office s $0 Share Institution Name Bank of America 189 25,422,347 20.67% Wells Fargo Bank 161 14,569,387 11.85% U.S. Bank 189 12,940,872 10.52% JPMorgan Chase Bank 211 12,235,289 9.95% KeyBank 162 8,935,023 7.26% 60.25% 60.25% Umpqua Bank 113 5,101,869 4.15% Washington Federal 83 4,916,698 4.00% Banner Bank 97 3,824,596 3.11% Columbia State Bank 79 3,644,783 2.96% Washington Trust Bank 26 3,192,886 2.60% 16.82% 77.07% Union Bank 42 3,098,038 2.52% Heritage Bank 69 2,853,726 2.32% Banner Bank 62 2,673,135 2.17% HomeStreet Bank 26 1,905,969 1.55% Yakima Federal Savings and Loan Association 10 1,367,785 1.11% Peoples Bank 24 1,179,743 0.96% Cashmere Valley Bank 11 1,148,312 0.93% Opus Bank 24 1,070,464 0.87% East West Bank 4 1,008,752 0.82% Kitsap Bank 21 846,053 0.69% 13.94% 91.01% The Commerce Bank of Washington (Zions) 1 727,672 0.59% Skagit Bank 11 686,204 0.56% Riverview Community Bank 14 618,304 0.50% First Federal Savings and Loan Assoc. of Port Angeles 10 602,816 0.49% Timberland Bank 22 598,670 0.49% Bank of the Pacific 16 585,507 0.48% First Savings Bank Northwest 1 582,464 0.47% HSBC Bank USA 4 485,763 0.39% Olympia Federal Savings and Loan Association 7 460,100 0.37% Baker-Boyer National Bank 7 438,737 0.36% 4.70% 95.71% Subtotals for Top 30 Banks 1,696 117,721,964 95.71% Remaining 58 Banks 136 5,269,500 4.29% Wedbush Securities Inc. 6 B. WA Deposit Market Share in 2007 and 2014 2007 Deposit Market Share by 2014 Deposit Market Share by Bank Deposits as % of Total Bank Deposits as % of Total Deposits Deposits 57.06% Top 5 Banks 60.25% Top 5 Banks 90.72% 96.36% Top 20 Banks Top 20 Banks 80.31% Top 40 Banks 88.83% Top 40 Banks Wedbush Securities Inc. 7 C. Number of WA State Bank Branch Offices vs Chartered Banks in 1994-2014 Offices vs Charters in Washington State 2500 200 180 2000 160 s e 140 ic Banks ff d O 1500 120 er t Bank 100 Offices Char of r of Chartered Banks e 1000 80 r b e b m 60 m Nu Nu 500 40 20 0 0 Wedbush Securities Inc. 8 D. Relative Stock Price Performance of Regional Banks Price Performance: January 15, 2014 – May 13, 2015 S & P 500 Index KRE Index Price Change (%) 20.00% Last Twelve Months 15.00% S&P 500 Index 10.59% KRE Index 11.26% 10.00% Last Six Months 5.00% S&P 500 Index 11.93% KRE Index 15.45% 0.00% Year to Date S&P 500 Index 1.96% -5.00% KRE Index 4.95% -10.00% KRE Index is the S&P Regional Bank Primary Benchmark -15.00% Wedbush Securities Inc. 9 E. Relative Stock Price Performance of Northwest Regional Banks $50.00 $45.00 $40.00 $35.00 $30.00 rice P $25.00 5/13/15 Closing Price Stock $20.00 52 week High $15.00 $10.00 $5.00 $0.00 BANR CACB COLB HFWA HMST PCBK RVSB TSBK UMPQ WAFD Northwest Regional Bank Stocks Wedbush Securities Inc. 10 II. Demographics and Starbucks Wedbush Securities Inc. 11 A. What are the Numbers Now?? Source: Torus Marketing , July 14, 2014. Wedbush Securities Inc. 10 B. What are the Numbers Over Time?? Wedbush Securities Inc. 13 C. Diversity and the Numbers! Wedbush Securities Inc. 14 D. Starbucks and Bank Branches! 1. Starbucks puts branches in concentrated locations. What